Piling On

Piling On

Although it’s rarely called there is a penalty in football for piling on. Based on recent events the people at Amylin (NASDAQ:AMLN) must feel like their being piled on. The latest move came from Lazard Capital Markets who downgraded the stock to a hold today based on concerns over some new Food and Drug Administration (FDA) guidelines for companies developing drugs to treat diabetes.

The big concern is that somehow these new guidelines will delay the company’s filing for the once-a-week version of Byetta, commonly known as Byetta LAR. To Diabetic Investor this is an interesting dynamic as the Street has finally seen the light with LAR and is beginning to understand the drug’s mega-potential. Therefore it makes perfect sense that anything that could delay LAR’s entering the market would be seen as a negative. We must admit this is quite a turnaround as many of the same analysts who now see LAR’s potential were the same people who felt Byetta wouldn’t be widely adopted because it had to be injected twice daily.

For their part Amylin officials have consistently stated that they expect to file LAR in early 2009, possibly late 2008. Even with these new guidelines Diabetic Investor sees little reason to doubt them. The main reason being LAR isn’t really a new drug, rather an improvement on an already approved drug, Byetta. This is not unlike what Merck (NYSE:MRK) did with Janumet™, which really isn’t a new drug but a combination of two existing drugs, Januvia™ and metformin. There are several other examples of drugs which originally came out in one version, only to see an extended version released later on.

Diabetic Investor can understand concerns over the company’s valuation IF the stock was trading in the 50’s or if the data for LAR wasn’t up to par. Neither of these situations exist. The stock continues to get hammered now trading at a new 52 week low. Meanwhile the data for LAR isn’t good, it’s excellent even surpassing what the current twice daily version of Byetta has demonstrated. In actuality LAR has outperformed regular Byetta and has done so with even fewer adverse events.

Granted no one knows what the FDA will do and it’s always possible they could ask for more data. The same could also happen to Novo Nordisk (NYSE:NVO) who is scheduled to submit their once daily GLP-1 Liraglutide before the end of the second quarter.

Regardless of what the FDA does Diabetic Investor still sees LAR as a paradigm shifting technology. A technology that has mega-blockbuster written all over it. A technology that Amylin’s partner Eli Lilly (NYSE:LLY) might just want to own outright. If Lilly isn’t careful, others might jump in and make a play for the company, especially with the stock at its current depressed price. This would not be an easy task given the terms of Lilly’s agreement with Amylin, but it is a task made easier when the stock is trading at $25 or so, rather than $50.

No matter what happens Diabetic Investor stands firm in our belief that LAR will be a mega-blockbuster and patient investors will be amply rewarded.

David Kliff
Diabetic Investor
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